PERSPECTIVE: ENFORCING THE FALSE CLAIMS ACT TO DETER THE PRACTICE OF HEALTH CARE FRAUD

The False Claims Act (FCA) of 1863 is a federal law that penalizes individuals or entities who defraud governmental programs. It allows civil remedies when a party knowingly makes a false statement or has the intent to defraud that is material and causes the government to lose money.

The FCA enables the federal government to recover in litigation for fraud committed against the government. The statute includes a qui tam provision that allows people who are not affiliated with the government to sue an organization on behalf of the government. This is informally called “whistleblowing”.  The Supreme Court case Vermont Agency of Natural Resources v. United States ex rel. Stevens (2000) presented the question of whether states or state agencies could be held liable under the FCA. The case involved a qui tam lawsuit against the Vermont Agency of Natural Resources, alleging that false claims were sent to the Environmental Protection Agency (EPA) in exchange for federal grants.

The Court ruled that states and state agencies are not “persons” subject to liability under the FCA. This decision was based on the interpretive presumption that the term “person” does not include sovereign entities like states. The ruling also emphasized the Eleventh Amendment, which bars private individuals from suing states in federal court without their consent. In addition to a qui tam lawsuit, enforcement of the statute allows government agencies to take enforcement action against people or entities who knowingly submit false claims. For example, The Department of Justice (DOJ) has been instrumental in recovering billions lost to fraudulent claims. Within the DOJ, settlements and judgments under the False Claims Act exceeded $2.9 billion in the fiscal year ending Sept. 30, 2024 and over $ billion related to matters that involved the health care industry [1]. Once recovered the money is allocated back to the defrauded federal programs, restoring the government’s objective in providing those funds.

The FCA prohibits the filing of fraudulent claims from services received for federal funding. The FCA defines a “claim” as any request or demand for money or property made directly or indirectly to the Federal Government.  The Supreme Court case Allison Engine Co. v. United States ex rel. Sander (2008) underscored the intent requirement under the FCA. The Court ruled that to establish liability under the FCA, plaintiffs must prove that the defendant intended the false statement to be material to the government’s decision to pay a claim. It was not enough to show that government funds were used; there also had to be an intent to defraud the government.  The Fraud Enforcement and Recovery Act of 2009 broadened the scope of the FCA by clarifying that the FCA applies not just to fraudulent claims submitted directly to the government but also to fraudulent claims made indirectly to the government by third parties.

The FCA is designed to protect the government from being overcharged or sold poor-quality goods or services. The Supreme Court case Universal Health Services, Inc. v. United States ex rel. Escobar (2016) explains the “implied false certification” theory under the FCA. The Court held that a defendant could be liable under the FCA if they submitted claims that made specific representations about goods or services provided but failed to disclose noncompliance with material statutory, regulatory, or contractual requirements [2].

The Court reasoned the failure to disclose noncompliance rendered the claims misleading. The decision emphasized the importance of materiality, requiring that the undisclosed violations be significant enough to influence the government’s payment decision. Under the FCA a person does not violate the False Claims Act by simply submitting a fraudulent claim to the government; to violate the FCA a person must have submitted, or caused the submission of, the false claim (or made a false statement or record) with knowledge of the falsity [3].

The basis for establishing intent under the FCA is outlined in §3729(b)(1).  This section defines “knowledge” in the context of false claims. It states that a person acts with knowledge if they have either (1) actual knowledge of the information’s falsity, (2) deliberate ignorance of the truth or falsity of the information, or (3) reckless disregard for the truth or falsity of the information [4]. This regulation ensures that liability under the FCA applies only to those who knowingly engage in fraudulent activities, even if they avoid confirming the truth of their claims. 

The case United States ex rel. Schutte v. SuperValu Inc. (2023) emphasized the knowledge requirement under the FCA. The plaintiffs accused SuperValu of defrauding federal health care programs by misreporting drug prices. SuperValu offered discounted prices through a price-matching program but reported higher retail prices as their “usual and customary” charges for reimbursement. The plaintiff insisted this discrepancy led to false claims being submitted to the government. The Supreme Court ruled that the FCA’s scienter (knowledge) requirement focuses on the defendant’s subjective knowledge and beliefs at the time of the alleged violation, rather than on an objectively reasonable interpretation of the law [5].  This decision highlights the fact that people could be held liable if they knowingly submitted false claims, even if their actions seem reasonable under an objective standard.

The FCA has been very effective in recoveries for fraud committed in the health care industry. The FCA makes it illegal to submit false or fraudulent claims to Medicare or Medicaid. Examples of health care fraud include billing for services never rendered; billing for more expensive services than rendered and billing for services that are not considered medically necessary. The FCA protects the integrity of the health care industry by preserving the capability to provide affordable quality care.

[1] “False Claims Act Settlements and Judgments Exceed $2.9 Billion in Fiscal Year 2024,” U.S. Department of Justice, Office of Public Affairs, March 8, 2025.

[2] Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016).

[3] Id.

[4] 31 . §§ 3729–3733.

[5] United States ex rel. Schutte v. Supervalu Inc., 598 U.S. 739 (2023).